Brookfield’s Gas Company Tower in DTLA heads to auction

Brookfield Properties’ Gas Company Tower in Downtown Los Angeles is officially up for grabs.

Lenders on the 52-story tower have scheduled a foreclosure auction for the property on Aug. 16, according to a notice of trustees’ sale filed with Los Angeles County earlier this week. 

Citi Real Estate and Morgan Stanley, which held a $350 million debt pooled into a commercial mortgage-backed securities deal, initiated the foreclosure on the building, according to the notice. 

But the tower could be sold before the auction date. JLL, which is marketing the building for sale, conducted a call for bids on Wednesday, court records show. 

While the property is up for foreclosure, it’s also in the hands of a receiver, Gregg Williams of Trident Real Estate, who had the power to sign a listing agreement with JLL and market the property for sale, and help lease it up, according to court records. The CMBS bondholders had sued to transfer the property into a receivership after the default. 

If bids do not come through, the CMBS bondholders, via Morgan Stanley and Citi, could take over the property at auction through a credit bid, and sell it after. Neither Williams nor a legal representative for the bondholders responded to a request for comment.

One potential buyer has emerged: South Korea-based Meritz Investment Management has “expressed interest” in buying the property, and is expected to make a bid, Williams said in a court filing earlier this week. Meritz holds a $65 million mezzanine loan on the tower. When Brookfield defaulted on the senior loan, it triggered a default with Meritz’s mezzanine loan, Meritz said in a court filing last month. 

The lender has asked to intervene in the receivership for the Gas Company Tower in an effort to “protect [its] position in the capital stack and its financial interest,” Meritz said in a filing. 

Ocean West Capital Partners, which is acting as a U.S. advisor to Meritz, has not responded to requests for comment. 

The auction comes more than a year after Brookfield defaulted on at least $450 million in loans tied to the 1.4 million-square-foot building, marking one of the first large-scale office defaults across L.A. County. Higher interest rates had ballooned Brookfield’s monthly payments, while leasing faltered. 

The property was most recently appraised at $214.5 million, down more than 60 percent from its valuation in 2021, according to Trepp data.

Last month, $400 million in debt tied to a separate Brookfield-owned building — the Bank of America Plaza at 333 South Hope Street — landed in special servicing, according to data from ratings agency Morningstar. 

The main issue: one of the largest tenants in the building, law firm Sheppard Mullin, plans to vacate the property, which will pull occupancy below 70 percent, according to Morningstar.